Secretary of Labor Withdraws Joint Employment Guidance

U.S. Secretary of Labor Alexander Acosta announced Wednesday the withdrawal of the Department of Labor’s 2015 and 2016 guidance on joint employment and independent contractors. The standard from the Obama administration determined when companies are joint employers of contract and franchise workers.

“Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act,” the Department of Labor said in a release.

This shift in policy under Donald Trump moves away from a standard much maligned in the franchising community. Perry McGuire, with Smith, Gambrell & Russell, LLP, wrote in a QSR article in March that “The idea that the employees of a franchise may also be the employees of the franchisor defeats the purpose and value of the franchise as a trademark license. For decades before these rulings, franchisors included support of employment practices in their franchise systems, the same way they included food safety and operational support.”

The standard made it so companies were considered joint employers as long as they hired, fired or set wages for employees. “Economic dependence” was also considered under the Obama administration definition.

As McGuire added, “The previous rule that franchisors could be held liable as a joint employer only if it exerted actual control of the franchisee’s employees served the industry well, and it allowed the franchisor to share its extensive resources on employee management with franchisees. Now, however, franchisors are not sure what to do.”

Essentially, the setup made it difficult for franchisors to support franchisees on the labor front. These guidances were not legally binding but did guide agencies on how to enforce federal laws.

The department also withdrew 2015 guidance regarding workers being improperly handled as independent contractors. It set standards to make it so these employees were eligible for minimum wage, overtime, and other protections.

The announcement, however, does not affect the joint employment definition expanded by the National Labor Relations Board. The legally binding standard requires joint employers to bargain with unions. It is currently under review by a federal appeals court.